Viacom Agrees to Sell Cable Unit for $2 Billion : Television: The deal with Intermedia Partners would create the nation’s biggest minority-owned system.

In a deal that would create the nation’s largest minority-owned cable TV system, Viacom Inc. has agreed to sell its cable franchises to a San Francisco-based partnership, sources close to the deal said Tuesday.

Under an agreement the parties expect to disclose this week, Viacom is to receive about $2 billion in cash and a lucrative tax certificate that would enable the New York-based cable TV network and media company to defer or avoid a capital gain of more than $1 billion on the sale of its half a dozen cable systems, the sources said.

The deal, which has been under negotiation for at least three months, would catapult Intermedia Partners--a privately held minority-run cable company with 750,000 cable TV subscribers and annual revenue of about $200 million--to the nation’s sixth-largest cable operator with nearly 2 million subscribers.

Intermedia, whose cable holdings are now concentrated mostly in Santa Clara County, Calif., and Nashville, Tenn., would get 1.1 million Viacom subscribers in metropolitan Seattle; Dayton, Ohio; the San Francisco Bay area, and three other cities.

“We really started focusing on this deal last Tuesday; we expect to announce the deal before the end of the year,” a source close to the talks said.

Spokespersons at Viacom’s cable unit and at Intermedia would neither confirm nor deny that an agreement had been reached.

The breakthrough apparently came after federal regulators resolved an antitrust dispute with Intermedia investor and Denver-based cable giant Tele-Communications Inc. earlier this month.

The Federal Trade Commission had been investigating whether the TCI-planned acquisition of rival Tele-Cable Corp. would create antitrust violations in Columbus, Ga., where the two companies competed for 2,800 viewers. Federal officials said subscribers would no longer have a choice of cable providers if TCI’s purchase went through.

TCI agreed to exclude those 2,800 subscribers from the deal, freeing it to purchase the other Tele-Cable properties and removing a cloud of uncertainty over whether the FTC inquiry might affect the Viacom-Intermedia deal because of TCI’s 31% interest in Intermedia.

Besides catapulting Intermedia to the top ranks of the $20-billion cable industry, the deal highlights the meteoric career of Frank Washington, a principal of Intermedia and a former executive at Times Mirror Co., publisher of the Los Angeles Times.

Ironically, as a result of the Viacom deal, Washington would capitalize on an obscure Federal Communications Commission tax rule he worked on while working as an aide and subsequently bureau chief at the FCC.

Washington would not comment when reached at his Sacramento office. But legal experts say that because Washington is a minority--he is black--Viacom can receive an FCC tax certificate enabling it to defer or avoid the income tax on any gain from its sale of cable properties to Intermedia as long as the money is reinvested in the purchase of other media properties.

Although the purchase price for Viacom’s cable systems is about $400 million lower than previously reported, analysts said there would probably be few financial repercussions on Wall Street.

“Everyone’s been expecting something around $2 billion to $2.4 billion; I’ve got to believe that figure is already accounted for in the (current) stock price” of Viacom, said Ray Katz, an analyst for Bear, Stearns & Co. in New York.